Empirical evidence presented in this paper shows that the predictability of inflation at long horizons varies considerably across countries. Both simple theory and empirical evidence suggest that the crucial factor is the extent to which systematic monetary policy succeeds in stabilising the...

This paper considers the implications of the permanent/transitory decomposition of shocks for identification of structural models in the general case where the model might contain more than one permanent structural shock. It provides a simple and intuitive generalization of the in.uential work...

If stock prices followed a random walk, uncertainty about future stock prices would be so great that the observed bias towards equities in long-term investment portfolios would be surprising. The good news is that if, as a growing body of research suggests, there is even a weak tendency for...

This paper argues that probability forecasts convey information on the uncertainties that surround macroeconomic forecasts in a manner which is straightforward and which is preferable to other alternatives, including the use of confidence intervals. Probability forecasts relating to UK output...

We examine the properties of a multivariate Dickey-Fuller t-statistic designed to test for a unit root in a panel while taking account of cross-sectional dependence. The asymptotic distribution is presented and critical values provided. When intercepts are present, a modification along the lines...

We build a compact global macroeconometric model capable of generating point and density forecasts for a core set of macroeconomic factors using recent advances in the analysis of cointegrating systems. We do so for a set of countries/regions and explicitly allow for interdependencies that exist...

This paper characterizes the asymptotic behaviour, as the number of assets gets arbitrarily large, of the portfolio weights for the class of tangency portfolios belonging to the Markowitz paradigm. It is as- sumed that the joint distribution of asset returns is characterized by a general factor...

In theory the potential for credit risk diversification for banks could be substantial. Portfolio diversification is driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the degree of dependence individual firms have to the...

This article reports the results of fitting unobserved components (structural) time series models to data on real income per capita in eight regions of the United States. The aim is to establish stylised facts about cycles and convergence. A new model is developed in which convergence components...

This paper deals with the issues of identification and estimation in the canonical model of contagion advanced in Pesaran and Pick (2007). The model is a two-equation nonlinear simultaneous equations system with endogenous dummy variables; it also represents an extension of univariate threshold...